Signs of rebound in Egypt’s tourism sector

The government in Egypt is expecting a recovery of its tourism sector by next year after the latest data showed the tide may be turning for an industry that has been hit hard by domestic instability over the past three years.

With Egypt’s recent period of relative calm following the May election of President Abdel Fattah al Sisi, countries are starting to lift travel advisories and the government is trying to lure back tourists through a number of initiatives.

The number of tourists arriving in Egypt increased 15.8% in July compared with the same month a year ago, according to recent figures from the Ministry of Tourism. Hotel occupancy reached 67.9% in August, an increase of 85.5%, with revenue per available room (RevPAR) rising 125% to LE382.87 ($53.5) according to the latest data from London-based consultancy and research firm STR Global. The high percentage increases are indicative of the depths to which occupancy and revPAR had plunged.

“Egypt reported a strong performance for the second consecutive month, due in part to low performing comparables in 2013 when the country experienced an outbreak of violence,” said Elizabeth Winkle, managing director of STR Global, said in a statement at the release of the latest data. “The question remains whether this uptick is the beginning of a turnaround.”

While the rebound is welcome news to the battered tourism sector, visitor numbers remain far behind pre-2011 revolution levels. In July 2010 more than 1.3m tourists visited the country; significantly higher than the 885,765 visitors recorded in the same month of this year. Moreover, in fiscal year 2013/14 tourist arrivals totalled 7.9m, down 42% from 2009/10 figures.

Green shoots

It will be some time before the industry experiences the same levels as before the January 25 revolution in 2011, but the improvements come as a small boost to the beleaguered economy. This is not surprising given that tourism is a mainstay of the Egyptian economy, contributing 11.3% of GDP and employing some 3.8m workers, according to government statistics. The sector also brings 14.4% of Egypt's foreign currency revenues - the lifeblood of the economy, paying for much needed energy and wheat imports.

The minister of tourism, Hisham Zaazou, recently predicted a full recovery by the end of 2015 - assuming the current level of stability is maintained - with the aim of attracting more than 25m tourists by 2020, he told Reuters. Zaazou’s upbeat outlook is partly due to a number of government programmes that are expected to bolster the sector and a depreciating pound which makes it an affordable destination for European travellers in particular.

Egypt’s ambitious 2020 plan is being driven by a three-year marketing campaign hoping to attract tourists and investors. The ministry is also heavily lobbying to ease any remaining foreign travel warnings as well as taking a multipronged approach to attract tourists from a variety of countries.

As well as pitching for tourists from Egypt's traditional markets in Europe and North America Zaazou is looking to target India, China and Latin American countries among others and the aim of a partnership with Gulf carriers Etihad Airways and Emirates Airlines, Zaazou told Reuters. In addition, the minister has announced increased direct flights from New Delhi to Egypt and the planned launched of direct flights from four points in China to Aswan in November, targeting 142,000 Chinese tourists in the first year, Zaazou added in a separate interview with Chinese news agency, Xinhua.

The country is also calling on GCC developers and hotel managers to invest in the market.

Marriott International’s president of Middle East and Africa told Bloomberg in October that the group may build 40-50 hotels in Egypt before 2020 - adding 10,000 hotel rooms - to capitalise on a surge of travellers due to the economic potential and tourist attractions. Occupancy rates at the chain's hotels in Egypt's capital, Cairo, and at Red Sea resorts have increased to between 60-75% from a range of 30 -45% since the May election, he said. "We see tremendous growth opportunities in Egypt."

Analysts agree that the long-term fundamentals are strong.  “Even though perhaps it’s a little bit difficult right now, we still have fundamentally high hopes for Egypt. It is a great market. It has great inventory, great product. Its physical location as well as its price point is correct and nicely set,” Nicolas Mayer, industry leader, lodging and tourism at PwC on Egypt’s hotel market told Gulf Business in June.

Security challenges linger

There are still some challenges that the country will have to overcome if it is to see the same volumes of visitors as it did four years ago. In February, an attack on a South Korean tour bus in the South Sinai, killing three, prompted additional security measures in the major destination for holidaymakers on the Red Sea.

In its wake, more than 15 European countries issued a travel warning to their citizens for the Sinai Peninsula, a major blow given that European tourists make up more than two-thirds of tourist numbers to Egypt, according to official data.

However Germany lifted its restriction in July, followed by Japan in August. Germany sent the second highest number of tourists to Egypt last year with 850,000 visiting the nation, resulting in $600m in profits, according to Chairman of the International Tourism Sector and the Tourism Activation Authority, Ahmed Shoukry.